Wednesday, January 14, 2004

The scandal of Conrad Black and Hollinger continues to develop. Some time ago I wrote about Hollinger's shareholders:

"I have no sympathy for shareholders who invest in a company with such a convoluted share structure that there may be no one alive who can determine who owns what, not to mention a company which is the current manifestation of a newspaper group set up originally to be an organ of propaganda for British intelligence, a role it still seems to take more seriously than making money for its shareholders."

Black essentially treated the public company like a private piggy bank, aided and abetted by what has to be one of the worstboards in corporate history (the board is rifewith conflicts of interest, which also extended into the world of journalism). A few comments:

Black's best trick was allegedly selling off company assets to corporations owned by himself and his cronies, and then rewarding himself by taking bonuses (or here) for the presumably brilliant sales, and getting the purchasing companies to insist on non-competition contracts with himself and other executives of Hollinger. In many if not most of these cases the purchasing company appears to have been owned by Black and his pals, so the money given to Black and his pals not to compete was money paid so Black wouldn't compete with himself. The Hollinger group was impoverished with each one of these asset sales, for part of the proceeds of the sales, which should have come back to Hollinger, was diverted to pay for Black and his pals not to compete with themselves (there also appears to be some question about the fairness of the purchase prices in these sales to related parties). The board of directors shouldn't have approved any of these transactions, as the company whose interests they were supposed to be looking out for was made poorer with each successive transaction.

On top of the huge salary and bonuses, the company also paid for much of Black's luxurious lifestyle. Black was also given what appears to be carte blanche to move assets around between the companies in the group to suit his own personal financial requirements. The most spectacular incident was the company purchase, for what was probably millions of dollars more than they were worth, of personal papers of FDR at a time when Black just happened to be writing a biography of his hero, FDR. This purchase was described as a sound corporate investment, but may have been the straw that broke the camel's back, alerting the shareholders to the fact they were being royally screwed.

Black's wife, foaming-at-the-mouth right-wing columnist and ultra-Zionist Barbara Amiel (famous, in a major social faux pas, for reporting that her guest the French ambassador - in what he no doubt felt was a private conversation - called Israel a 'shitty little country', thus forever naming it in the minds of many people), who used to boast of taking one of the company jets on shopping trips to New York (which sounds like theft of corporate assets to me), has her own set oftroubles regarding being paid large amounts of money for doing what seems to be nothing.

When the whole complex web started to fall apart, Black ordered ever more complexfinancial cures to shift money around to where it was most needed. Although he would have been completely lawyered up, and no one would have missed the tax implications, I wonder if in the panic to get money where it was needed all the taxes owing due to the restructurings and shifts of assets were paid. I don't have any special information, but this sort of problem has occurred in similar instances with other troubled companies in the past. It will be interesting to watch if some government comes along with a big tax bill.

I've always wondered how much Black is really the main man at Hollinger. Buried in the labyrinth of corporations that make up the Hollinger group is the original parent company, Argus Corporation (which now has its own problems). Argus Corporation was set up by E. P. Taylor in 1945. E. P. Taylor worked with Sir William Stephenson ("Intrepid") in the Second World War in British Intelligence, and there is every reason to believe that the purpose of Argus went further than the making of money. The deal seemed to be that the 'owner' got to live like a rich man as long as the company operated to further the goals of its underlying sponsor. Hollinger publishes newspapers with a very right-wing slant, and I wonder if the influence of British Intelligence is still operating today. There is a rather unpleasant story of how Black acquired Argus, and I've always wondered whether that story covered a bigger secret. I also wonder whether Black is as much in charge as he would like us to believe.

Black likes to portray himself as a living Horatio Alger story, but he was born filthy rich, and may have had help from a 'spooky' crowd to build his little empire. His main problem seems to be that he attempted to live like a billionaire on a millionaire's income, and made up the shortfall with what the business press likes to call 'aggressive' techniques. He is one of those types you see from time to time who inherit $500 million, die with an estate of $50 million, and the business press in the obituaries fall over themselves gushing at what a financial genius he was.